focus on Where to Stay Invested In

Context: Reducing fiscal deficit should not be the sole focus of disinvestment policy instead it should be intended towards achieving sustainable economic growth of PSUs.

Model Disinvestment Policy

• Shift focus from strategic disinvestment to strategic investments: among 348 centrally controlled PSUs, only a few are categorized as ‘strategic assets’ leaving the rest of PSUs at the fate of disinvestment (Annual Public Enterprises Survey).

• Form a separate ‘asset management’ entity: i.e a limited and sector-specific trust fund.

• A trust fund would have a controlling stake in all the individual PSUs to be disinvested.

• Management company (for every trust): to optimize valuations and the disinvestment route, and act as a strategic investor for startups and emerging technology companies in their respective sectors.

• Independent and autonomous board: with sector-specific experienced experts and executives for managing trust and management company.
• Management company should conduct a detailed diagnostic of each of the companies in the trust, in line with the previously stated objectives.
• Detailed roadmap: to ensure that the peak strategic value is created over (maximum) five years. 
• Identification of hidden value and most optimal structure: for PSUs that will require ‘as is’ immediate sell-offs. 
• Apart from having broad liberalised FDI policies: cement ties with other countries through cross-investments.

Conclusion: Strategic disinvestment policy will contribute to wealth creation, ensure the government’s sustainable income (through dividends from the holding company), asset appreciation through external markets, support to startup ecosystems, and anchor bilateral ties.